Philip purchases ten lawnmowers through a sale or return contract. He plans to resell
the lawnmowers in his garden supply store. The contract specifies that Philip must
return the lawnmowers within six months if he decides that he does not want them.
After seven months, Philip has sold five mowers, but decides that he does not want to
keep trying to sell the rest of them. Philip
a. can return the five remaining lawnmowers and not have to pay for them.
b. cannot return the five remaining lawnmowers because the sale was considered
finalized after six months.
c. can return the five remaining lawnmowers as long as he does so before a year has
passed.
d. can return the five lawnmowers as long as he pays all costs related to shipping them.
ViolentVideoGames, Inc. markets a variety of shooting, fighting and hunting video
games. A state statue is enacted that requires all video game manufacturers to label any
games with an option to kill something as “excessively violent”. A court would likely
hold this regulation to be
a. an unconstitutional restriction of speech.
b. constitutional under the First Amendment.
c. justified by the need to protect individual rights.
d. necessary to protect national interests.
Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional
business capital but to maintain control. This can best be accomplished by
a. borrowing funds.
b. bringing in partners.
c. issuing stock.
d. selling the business.
Evan is charged with a crime. Almost all federal courts and some state courts would not
hold Evan liable if, at the time of the offense, as a result of a mental disease or defect,
Evan lacked substantial capacity to
a. appreciate the wrongfulness of his conduct only.
b. appreciate the wrongfulness of his conduct and obey the law.
c. appreciate the wrongfulness of his conduct or obey the law.
d. obey the law only.
Fact Pattern 33-2 (
Amy signs a lease on behalf of Business Start-up, Inc. (BSI), with Cool Properties, Inc.
As part of the lease, Amy signs a document titled “GUARANTY,” which states that it is
“an absolute guaranty” of the lease’s performance.
Refer to Fact Pattern 33-2. If BSI stops paying the rent, liability for the unpaid rent will
be assessed against
a. Amy and BSI.
b. BSI only.
c. Cool only.
d. no one.
Fred’s Paper Shop frequently buys paper from Online Office Supplies, Inc. Online
Office Supplies and Fred’s Paper Shop decide to enter into a partnering agreement. One
of the advantages of entering into a partnering agreement is that
a. the costs of all transactions will be reduced.
b. the likelihood that disputes will arise under their contract is reduced.
c. neither party will be able to file suit for breach of contract.
d. Fred’s Paper Shop will not be able to file suit for breach of contract.
Dave’s uncle tells Dave that if “he feels that Dave deserves it,” he will give Dave
$1,000 when Dave graduates from college. Dave’s uncle’s promise is
a. illusory.
b. enforceable.
c. a forbearance.
d. a preexisting duty.
To cover the loss of its inventory in the event of a fire, Great Goods, Inc., seeks an
insurance policy from United Insurance Company. On May 1, Great Goods pays United
a quarterly premium. On May 2, United issues a policy that provides coverage begins
after thirty days. On May 15, Great Good’s inventory is lost in a fire. Regarding the
proceeds, United
a. must pay, because the possibility of a fire was the reason Great Goods obtained the
insurance.
b. must pay, because Great Goods paid the premium.
c. must pay, because United issued a policy.
d. need not pay.
Eli, a minor, buys an automobile insurance policy from Faithful Insurance Company
and pays a $1,000 premium. If Eli can disaffirm the contract, he can most likely recover
a. $500.
b. $1,000.
c. $1,500.
d. nothing.
Leah gains access to government records and alters certain dates and amounts in her
favor. This is
a. embezzlement.
b. forgery.
c. larceny.
d. no crime.
Fact Pattern 32-1
General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1
million from Helpful Finance Corporation for a security interest in the equipment. The
next day, GLC borrows $500,000 from Interstate Bank, also for a security interest in the
equipment. GLC defaults on the loans.
Refer to Fact Pattern 32-1. Suppose that Helpful perfects its security interest when GLC
takes possession of the equipment. In that circumstance, the party with priority to the
collateral on GLC’s default would be
a. GLC.
b. Helpful and Interstate proportionately.
c. Helpful only.
d. Interstate only.
Rafi, a director of Super Service Station Corporation, does not attend a board meeting
for three years. During that time, Twyla, Super’s president, makes improper loans that
cost the company $100,000. Rafi is most likely
a. liable for negligence or mismanagement.
b. liable for violation of the business judgment rule.
c. not liable because missing meetings is an honest mistake.
d. not liable because missing meetings is only poor judgment.
Clean Health Insurance, Inc. sends Kathy a health insurance termination. The health
insurance termination is
a. governed by the E-SIGN Act.
b. not governed by the E-SIGN Act.
c. governed by Article 2 of the UCC.
d. governed by Article 2A of the UCC.
Congress enacts a statute to outlaw a specific type of anticompetitive business
agreement. Like other laws that regulate economic competition, this law is referred to
as
a. a federal trade commission act.
b. an antitrust law.
c. an interstate commerce act.
d. a suppressive restraint on trade.
Briana, an employee of Cotillion Bank, is charged with embezzlement, which requires
a. fraudulently appropriating another’s property.
b. obtaining lawful possession of property.
c. physically taking property from its owner.
d. the use of force or fear.
Jay is a surety for Karen’s loan from Little Bank. Jay’s right to be reimbursed by Karen
after having paid her debt is the right of
a. contribution.
b. redemption.
c. reimbursement.
d. subrogation.
A court awards a judgment to Alice, who is the creditor, against Ada, who is the debtor.
After the judgment, Alice requests a court order to seize Ada’s property to ensure that
the judgment will be collectible. This is
a. a judicial lien.
b. a writ of attachment.
c. a writ of execution.
d. a violation of most state laws.
Bob, research manager for CornAgri Products, Inc., applies utilitarian ethics to
determine that an action is morally correct when it produces the greatest good for
a. Bob.
b. CornAgri.
c. the fewest people.
d. the most people.
Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of
any claim, defense, or defect. With respect to this check, Kilroy is
a. an extraordinary holder in due course.
b. an ordinary check passer.
c. an ordinary holder.
d. an ordinary holder in due course.
Gilbert finds an iPad on the counter at Starbucks. He takes the iPad to the police
station’s lost and found counter. The policeman at the counter tells Gilbert that if the
iPad is not claimed in a certain amount of time, Gilbert can obtain title to it. This is an
example of
a. acquiring possession under an estray statute.
b. a bailment.
c. acquiring ownership by confusion.
d. acquiring ownership by possession.
Jonathon promises to pay child support and alimony to his ex-wife every month after
their divorce. Jonathon has
a. only a moral obligation to do keep his promise.
b. only a legal obligation to keep his promise.
c. both a legal and a moral obligation to keep his promise.
d. no obligation to keep his promise.
Jaycee is a shareholder for Designer Pet Clothes, Inc. Designer Pet Clothes uses
cumulative voting to elect directors. This means that the number of Jaycee’s votes is
determined by
a. how long Jaycee has been a shareholder.
b. the number of members of the board to be elected multiplied by the total number of
voting shares Jaycee holds.
c. the number of shareholders present at the most recent shareholders’ meeting.
d. the number of shareholders’ meetings Jaycee has attended in the past year.
Mona and Nero want to discharge their contract by executing and performing a new
agreement. They can best accomplish this by
a. accord and satisfaction.
b. novation.
c. reinvention.
d. specific performance.
AAA Auto Repair receives a discharge in bankruptcy, even though some creditors hold
judgments on overdue debts against it and others filed actions to collect on overdue
debts before the bankruptcy. AAA’s discharge will
a. neither stop actions nor void judgments regarding overdue debts.
b. only stop actions to collect overdue debts.
c. only void uncollected judgments on overdue debts.
d. stop actions and void judgments regarding overdue debts.
Geoff serves in a representative capacity for Huck. To accomplish the objectives of this
relationship, Geoff’s authority can be implied
a. by contradiction.
b. by custom.
c. by lack of reason.
d. under no circumstances.
To notify the public of a proposed rule, the Food Safety and Inspection Service, like
other federal agencies, publishes the proposal
a. in a nationally distributed newspaper.
b. in a trade journal available to members of the industry.
c. in the Federal Register.
d. on a public television station.
Fact Pattern 33-1
Alpha Corporation needs to borrow money to meet its payroll. Blair, Alpha’s owner,
asks City Bank to loan Alpha the funds.
Refer to Fact Pattern 33-1. If City Bank insists that Blair sign the loan application to
assume liability for payment only if Alpha defaults, Blair will be
a. not truly liable because she signed only at City Bank’s insistence.
b. primarily liable.
c. secondarily liable.
d. tertiarily liable.
Like the bylaws of other corporations, the bylaws of Retail Sales, Inc.,
a. establish the operating name of the corporation.
b. establish the value and classes of corporate stock.
c. were adopted at its first organizational meeting.
d. were submitted for approval to the public official in charge.
Margaret, who is not an expert on horses, offers to sell a horse, a saddle blanket, and a
bridle to her neighbor Betty for $2,000. Betty signs the bill of sale and pays the $2,000,
but says that she wants a saddle as well. If Margaret does not give Betty a saddle along
with the other goods and Betty files suit against Margaret for breach of contract, the
court will probably
a. require Margaret to give Betty a saddle and not require Betty to pay any more money.
b. void the entire contract and return both parties to their initial status.
c. enforce the contract according to the original terms.
d. require Margaret to give Betty a saddle, but also require Betty to pay Margaret more
money.
E-Bank, an online financial institution, gives financial information about Paula and
other customers to a federal agency without the customers’ permission. E-Bank may be
liable under
a. the Federal Trade Commission Act.
b. the Financial Services Modernization Act.
c. the Right to Financial Privacy Act.
d. the Uniform Electronic Transactions Act.
Every state has adopted some or all of the Uniform Commercial Code.
A landlord is usually NOT entitled to damages when a tenant wrongfully retains
possession of property.
If a principal does not ratify an authorized contract, the principal is not bound.
A check is NOT a substitute for cash.
Legally, a merger and a consolidation are the same thing.
A price quotation with a mistake in the adding of a number of figures will never render
a contract unenforceable.
An instrument “payable to bearer” is transferable but not negotiable.
Current City (CC) is a retail seller of television sets. CC sells Dhani a $3,000
large-screen, high-definition, LED set on a retail installment security agreement in
which he pays $100 down and agrees to pay the balance in equal installments. CC
retains a security interest in the set, and perfects that interest by filing a financing
statement centrally. Two months later, Dhani is in default on the payments to CC and is
involuntarily petitioned into bankruptcy by other creditors. Discuss CC’s right to
repossess the TV set and whether CC has priority over the trustee in bankruptcy.
If a contract does not require that performance be rendered directly to a third party, the
third party is an intended beneficiary.
A trustee has the power to avoid a sale of the debtor’s property.
A principal who causes a third person to believe that another person is the principal’s
agent can be estopped from denying the agency relationship.
A check “payable to the order of bearer” is neither an order instrument nor a bearer
instrument.
Identity theft occurs when a wrongdoer steals another’s form of identification.
A subpoena ad testificandum is an order compelling a witness to appear at an agency
hearing.
There is one set of procedural rules for federal courts and one set for state courts.
A contract is valid only if both of the parties entering into it have the capacity to do so.
In State X, persons must be at least eighteen years old before they can purchase
alcoholic beverages. The state also has passed a law requiring that persons who prepare
and serve liquor in the form of drinks in commercial establishments be licensed. The
only requirement for obtaining a yearly license is that the person be at least eighteen
years old. Moffitt, aged thirty-five, is hired as a bartender for Lone Star Restaurant.
Bekins, an alumnus of State X University, brings twenty of his friends to the restaurant
to celebrate State X U’s football victory. Bekins orders four rounds of drinks, and the
bar bill exceeds $200. When Bekins learns that Moffitt has failed to renew his
bartender’s license, Bekins refuses to pay, claiming the contract is unenforceable. Is
Bekins correct? Explain.